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Licensing 101

From retail stores to the supermarket to the Superbowl, we’re surrounded by licensed merchandise every day. But from a brand licensing agency’s perspective, it’s surprising how little business owners and consumers really know about this multibillion dollar industry. Let’s start with a quick primer.

Licensing is the process of leasing or renting a brand’s image to manufacturers looking to sell products associated with the licensor’s brand. Licensed products conjure up powerful associations that will often sway a consumer into purchasing what they see as an extension of a favorite and familiar brand. It’s a great way for brand owners (licensors) to extend into new markets while boosting both revenue and recognition. Popular brands already have an established customer base, a foothold in the market, and consumer loyalty—making a licensing deal an accelerated profit route for licensors, too.

Although historical documentation on the subject is scarce, the origin of licensing can presumably be traced all the way back to the Middle Ages Roman Catholic Popes were believed to have granted licenses to local tax collectors, who earned the right to be associated with the church by paying “royalties” to the Vatican. While licensing has mainly shifted into consumer territory in the centuries since then, the motivation for companies looking to license with well-established brands is largely the same: the popes had street cred.

Let’s fast forward from the popes to Playboy. One of the earliest modern examples of brand licensing was Playboy’s licensed cufflinks, which featured their iconic bunny head logo in 1955. The magazine’s first foray into brand licensing helped make their logo one of the most recognizable in the world, and many more licensing partnerships followed.

Coca-Cola has also had a rich licensing history, with its most recent collaborationfeaturing artist designed notebooks, tote bags, and other products to celebrate the 100th anniversary of the iconic Coke bottle. By extending into so many product categories, Coke has created a strong unique brand that inspires consumer confidence and allows fans to connect even when they’re not drinking a Coke.

Strategically licensing your product can be a win-win. From a brand owner’s perspective, it allows you to gain a new customer base and market sector or a distribution channel. Think of Ford, a company that sells cars, but also licenses their brand to translate into art that adorns the walls of so-called “man caves,” as well as apparel and power tools. Licensees benefit by getting to ride on the coattails of an already established brand instead of having to break into a cluttered market starting from scratch. And consumers win because they can stay loyal to brands they already know, love and trust. From an economic perspective, a well-conceived licensing deal is a huge win for everyone involved in the consumer cycle.